Repeated delegation (Q785526)

The authors study properties of the following economic model. ``We consider an infinite-horizon game played between a principal P and an agent A, time is discrete. The principal and the agent play the same stage game in every period. Each period the principal chooses whether or not to delegate a project adoption choice to the agent, i.e. P publicly decides whether to freeze project adoption or to delegate it. If P freezes the project, then no project is adopted and the payoff of both players is zero. If P delegates the project, then A decides whether or not to initiate it. The current period's project is good with a given probability and bad with complement probability.'' P prefers good projects to nothing, but prefers inactivity to bad projects. The authors characterize equilibrium payoffs at fix discounting and show that Pareto optimal equilibria are implemented.